Citizens Property Insurance should raise rates by more than the 10 percent allowed under state law and it should reduce coverage, according to a recent report from Florida State University's storm risk management center.

The report comes weeks before the start of the 2012 annual legislative session. Lawmakers have proposed bills to reduce the financial risk to Floridians of state-backed Citizens and are considering other proposals.

With 79 private home insurers, Florida has more companies selling residential property insurance than any of the other eight coastal states the report evaluated. It's followed by Texas, which has 69. A few national insurers that sell most homeowners policies nationwide have scaled back from the state, leaving smaller Florida-based insurers to fill the gap, according to the report.

"Despite the high number of insurers and the relatively high total premium amounts sold in
Florida, the State’s private homeowners insurance market has the [lowest claims-paying reserves] of any catastrophe-prone state other than Texas," the report says.

The report notes the average premium for $1,000 in coverage has decreased since December 2005, despite increasing in the first half of 2007, largely because people bought more coverage while state leaders approved measures to keep rates from increasing. Many policyholders have also increased their deductibles in order to minimize rate hikes.

The report recommends the state:

Increase premiums for Citizens' policyholders by more than the 10 percent a year allowed. If this doesn’t happen, the report says it would take five more years to make some policyholders’ rates as high as they’re supposed to be.

Have insurers, including Citizens, provide less coverage. “Limited coverage would make insurance more affordable,” the report noted. Citizens, the largest home insurer in the state, started cutting some of its coverage and plans to implement new coverage reductions in 2012.

Reduce how much cheap backup coverage the state sells. The Florida Hurricane Catastrophe Fund was expanded in 2007 to allow insurers to pass savings from it to consumers. In recent years, legislators started shrinking how much coverage is offered and raising its rates.

The report backs proposals to do more of that in order to avoid “difficult, or even unaffordable, future assessments.” Nearly all Floridians are subject to paying fees to offset deficits in the catastrophe fund.

Shift the state's focus from making rates affordable to making them fair. If regulators and lawmakers want to make rates affordable, they should subsidize premiums just for low-income Floridians instead of most policyholders.

Stop inflating discounts to policyholders that hurricane-proof their homes but keep encouraging them to do so. “Several studies have shown the cost effectiveness of mitigation in reducing hurricane” claims costs, according to the report. “Other studies have shown that homeowners may opt not to engage in windstorm and storm surge mitigation due to a perceived lack of affordability and/or uncertainty about the cost-benefit outcomes.”

For instance, some homeowners have complained the past two years that insurers are taking away legitimate discounts when trying to find ones that aren’t deserved.

Require home sellers to disclose the cost of hurricane insurance. This is already required for property taxes and for flood insurance. The disclosure may result in some people changing their minds about wanting to live in risky, coastal areas. Former Gov. Charlie Crist supported a state law that would have required home sellers to disclose how hurricane-resistant their properties are starting this year but the state Legislature overrode his veto of a bill repealing the requirement.

Provide tax breaks and other incentives to insurers that want to sell property insurance in Florida. “A premium tax credit will help offset the cost of holding catastrophe reserves to pay for losses due to severe storms in Florida’s future,” according to the report.

Comments

"Require home sellers to disclose the cost of hurricane insurance. This is already required for property taxes and for flood insurance."

Exceuse me but disclosure of the horrifically unfair and abusive property tax scheme in FL is NOT disclosed. Save Their Home is a tax shift from one segemnt of the population to another as well as generational theft. It is an un-American disgrace and the media keeps its mouth shut just like the phony politicians.

The FSU report is correct, accurate, and well researched. Sure, the uneducated -- and those that simply oppose free market forces -- will come out against it, but that doesn't mean those people are correct; they are not. We, as residents of Florida, should NOT be subsidizing people who want to live near the coast. Frankly, if you want to live here, you should be able to afford the associated costs, and insurance is one of those costs. Unless, of course, you pay cash for your home or condo, and then you don't need any home insurance. Citizens should not be a market of "first resort," but the absolute last place anyone turns to for coverage on their home.

Florida is a sess pool for fraud. Everyone tends to think that hurricanes are the only claims that happen. You know how many fraudulent tiles claims, or fake fires, or "sinkhole" claims are filed each year? You know how much that cost each and everyone of us?
No... you don't!
In Florida, the "many" pay for the fraud that the "few" commit. But the few are growing in numbers... it is a viscious circle. The numbers are astounding... but there are thousands of legit plumbing claims... and you public adjusters really only care about your well being right? They dont care about collecting their 20-30% of your claim check... cause they are doing the right thing for YOU!
Its all Bologne... living in Florida is becoming pretty frustrating. Those public adjusters are like the PIP attorneys... they'd sell there soul for a buck! Move to Wyoming... you never hear anything bad coming out of Wyoming!

Pkease tell me immediately which of the 79 private home insurers mentioned in your article is willing to insure a home built in 1965. I tried and tried to find one but everywhee I turned I was denied coverage because of the age of my house. Please give me the info ASAP as my CITIZENS policy ($4,000 premium for a 1600 sq. ft. house west of U.S. 1 ia up for renewal in March and this past July, I was infomed that there would be a MINIMUM increase in the cost of my premium of $1,000. Hurry please...I need help from those "other" insurance companies.

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About the authors

PAUL OWERS is a West Palm Beach native who graduated from the University of Central Florida in 1989. He covers the housing market for the Sun Sentinel after spending seven years on the real estate beat for that daily paper just up the road. He has impeccable timing, arriving at the Sun Sentinel on the very day that Hurricane Wilma pummeled South Florida. The real wrath came in early 2006, from readers, when he wrote that the five-year housing boom was over. They argued, cursed and complained before grudgingly admitting he was right.Follow @paulowers